PracticeConsultingAccountancy Age story: Volkswagen facing standards dilemma

Accountancy Age story: Volkswagen facing standards dilemma

German car manufacturer Volkswagen is gearing up to abandon German accounting standards in favour of either US GAAP or International Accounting Standards, chief financial officer Bruno Adelt said this week, the new issue of Accountancy Age reports.

The move by Europe’s biggest carmaker could make or break fresh attempts to introduce global standards. If Volkswagen chooses US GAAP over International Accounting Standards the US will have made a leap forward in getting its standards internationally accepted.

A decision could also reopen the controversy surrounding accounting rules in the car industry.

Discrepancies between UK and German practice fell under the spotlight last year when losses at subsidiary Rover were cited as the reason for BMW’s threat to stop building cars at the Rover Longbridge plant.

Rover’s accounts, compiled under UK GAAP and filed at Companies House, showed it made profits of £147m between 1994 and 1997. BMW’s consolidated accounts prepared following German standards showed Rover making a loss of £363m in the same period.

The different figures arise mainly as a result of differences in UK and German methods of accounting for depreciation.Now VW has been linked to Rover and Land Rover, BMW has sought to fight speculation that Europe’s largest car maker could take over the British subsidiary.

The planned change in accounting policies follows mounting criticism among institutional investors of VW’s disclosure and communication policies.While Adelt has not revealed which accounting model he favours, he confirmed any change is likely to happen when the company switches its base accounting currency to the euro in 2001.

Changing its accounting methods would help revive VW’s share performance, where gloomy profit forecasts have seen the company become the weakest performer in Germany’s top 30 Dax share index.

US Securities and Exchange Commission takes step forward in accepting international standards

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